VRINDA FARMS PRIVATE LIMITED vs. DEPUTY COMMISSIONER OF INCOME TAX

PDF · subscribers
W.P.(C)/12502/2023HC DelhiDLHC01037869202303 February 2025Author: HON'BLE MR. JUSTICE YASHWANT VARMA,HON'BLE MR. JUSTICE HARISH VAIDYANATHAN SHANKAR6 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the reassessment action initiated by the issuance of notices under Section 148 of the Income Tax Act, 1961, for Assessment Year 2012-13 could not be sustained. The Court's reasoning was based on the application of the First Proviso to Section 149(1) of the Act, which mandates an examination of whether a reassessment notice could have been issued within the timeframes stipulated by the Act as they existed prior to the commencement of the Finance Act, 2021. The Court referred to its previous decision in Dinesh Jindal vs. Assistant Commissioner of Income Tax, which clarified that for searches conducted on or after April 1, 2021, the reassessment action must satisfy the foundational tests in the First Proviso to Section 149(1), including those applicable under Sections 153A and 153C. The Court noted that the computation of the ten-year block period, as explained in Ojjus Medicare Private Limited, would mean that AY 2014-15 was the last year that could have been reopened under Section 153C. Since AY 2012-13 falls outside this ten-year block, the reassessment action was found to be invalid. Consequently, the Court allowed the writ petitions and quashed the impugned notices.

What were the facts?

This judgment concerns a batch of writ petitions filed by Vrinda Farms Private Limited, Animate Infrastructure and Projects Limited, Nouvelle Securities Private Limited, and Helios Infrastructure A Projects Limited. The petitioners are challenging reassessment actions initiated by the Deputy Commissioner of Income Tax through notices under Section 148 of the Income Tax Act, 1961. These reassessment actions were triggered by a search conducted on Filatex Group on September 1, 2021. The Revenue alleged that the non-searched entities (the petitioners) were liable for reassessment based on material gathered during the search. The assessment years in question pertain to AY 2012-13. The petitions were filed in 2023.

What were the issues?

1. Whether the reassessment action initiated by the issuance of notices under Section 148 of the Income Tax Act, 1961, for Assessment Year 2012-13 is valid, considering the First Proviso to Section 149(1) of the Act and the time limits prescribed under Section 153C, particularly when the search occurred after April 1, 2021. The Assessee's contention is that the reassessment action for AY 2012-13 is invalid. They argue that the First Proviso to Section 149(1) requires an examination of whether a notice under Section 148 could have been issued within the time limits as they stood before the Finance Act, 2021. They rely on the calculation of the ten-year block period, which, according to their affidavit, ends with AY 2014-15, making AY 2012-13 beyond the permissible period. They also refer to the High Court's decision in Dinesh Jindal vs. Assistant Commissioner of Income Tax. The Revenue's contention, as implied by the issuance of the notices and the arguments presented in the judgment, is that the reassessment action is valid. However, the judgment does not explicitly record the Revenue's specific arguments against the assessee's claims regarding the time limits and the application of Section 153C.

Which sections of the Income-tax Act were involved?

Section 148,Section 149(1),Section 153A,Section 153C

AI-generated summary — verify with the full judgment below

Heard together (3 matters)

W.P.(C) 12502/2023
W.P.(C) 12506/2023
W.P.(C) 12550/2023

Read from the judgment's own cause title. This page is filed under one of them.

Cause title — parties, addresses and appearances
W.P.(C) 12502/2023 & Connected Matters Page 1 of 6 $~33-36 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 12502/2023 VRINDA FARMS PRIVATE LIMITED .....Petitioner Through: Mr. Arvind Kumar, Adv. versus DEPUTY COMMISSIONER OF INCOME TAX .....Respondent Through: Mr. Sunil Agarwal, SSC with Mr. Shivansh B. Pandya, Mr. Viplav Acharya, Ms. Priya Sarkar, JSCs & Mr. Utkarsh Tiwari, Adv. 34 + W.P.(C) 12506/2023 ANIMATE INFRASTRUCTURE AND PROJECTS LIMITED .....Petitioner Through: Mr. Arvind Kumar, Adv. versus DEPUTY COMMISSIONER OF INCOME TAX .....Respondent Through: Mr. Sunil Agarwal, SSC with Mr. Shivansh B. Pandya, Mr. Viplav Acharya, Ms. Priya Sarkar, JSCs & Mr. Utkarsh Tiwari, Adv. 35 + W.P.(C) 12550/2023 NOUVELLE SECURITIES PRIVATE LIMITED .....Petitioner Through: Mr. Arvind Kumar, Adv. versus DEPUTY COMMISSIONER OF

This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/07/2025 at 23:34:59 INCOME TAX

.....Respondent Through: Mr. Debesh Panda, SSC with Mr. Vikramaditya Singh, Ms. Zehra Khan, JSCs, Ms. Anauntta Shankar & Ms. Yashika Gupta, Advs. 36 + W.P.(C) 12570/2023

HELIOS INFRASTRUCTURE A PROJECTS LIMITE AND

.....Petitioner

Through: Mr. Arvind Kumar, Adv.

versus

DEPUTY COMMISSIONER OF INCOME TAX

.....Respondent Through: Mr. Sunil Agarwal, SSC with Mr. Shivansh B. Pandya, Mr. Viplav Acharya, Ms. Priya Sarkar, JSCs & Mr. Utkarsh Tiwari, Adv.

CORAM:

HON'BLE MR. JUSTICE YASHWANT VARMA HON'BLE MR. JUSTICE HARISH VAIDYANATHAN SHANKAR

%

03.02.

2025 O R D E R

1.

This batch of writ petitions impugn the reassessment action which has been initiated by the respondents with the issuance of notices referable to Section 148 of the Income Tax Act, 19611 and pertaining to Assessment Year2

2.

The reassessment action was itself trigerred by a search which was undertaken upon Filatex Group on 01 September 2021. This led to the issuance of the impugned notices with it being alleged by the 2012-13. 1 Act 2 AY This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/07/2025 at 23:34:59 respondents that the petitioners, who were the non-searched entities, would be liable to be subjected to a reassessment action basis the material which had been gathered in the course of that search.

3.

It is in the aforesaid backdrop that learned counsel appearing in support of the writ petitions draws our attention to the First Proviso to Section 149(1) of the Act and which reads as follows:- “149. (1) No notice under section 148 shall be issued for the relevant assessment year,— xxxx

xxxx

xxxx Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if [a notice under section 148 or section 153A or section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C, as the case may be], as they stood immediately before the commencement of the Finance Act, 2021

:”

4.

Tested on the aforesaid provision and which would necessarily entail us examining whether AY 2012-13 would fall within the block of ten years, we take note of the following averments which appear in Para 6 of the additional affidavit which has been filed in WP(C) 12502/2023:- “6. That applying the ratio of the decisions of the Hon'ble High Court as referred above, to the facts of the case of the Petitioner herein, where both the satisfaction recorded by the Respondent & the impugned Notice issued u/s 148 of the Act falls within the period relevant to A.Y. 2023-24, the calculation of the period of ten assessment years for which the impugned Notice for re- assessment could have been issued on 31.03.2023 is as per the tabular chart below:-

A.Y. 2023-24 1st Year A.Y. 2022-23 2nd Year A.Y. 2021-22 3rd Year This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/07/2025 at 23:34:59 A.Y. 2020-21 4th Year A.Y. 2019-20 5th Year A.Y. 2018-19 6th Year A.Y. 2017-18 7th Year A.Y. 2016-17 8th Year A.Y. 2015-16 9th Year A.Y. 2014-15 10th Year

5.

It thus becomes apparent that the last year which could have been reopened, if the provisions of Section 153C were kept in mind, would be AY 2014-15. 6. “8. and where we had, on consideration of the relevant statutory scheme, held as follows:- Undisputedly, and in terms of Section 153C(3) of the Act, any search if conducted after 01 April 2021, would cease to be regulated by that provision. Sub-section (3), in that sense, embodies a sunset clause insofar as the applicability of Section 153C is concerned. The First Proviso to Section 149(1), however, bids us to go back in a point of time, and to examine whether a reopening would sustain bearing in mind the timeframes as they stood embodied in Section 149(1)(b) or Section 153A and 153C, as the case may be. The First Proviso essentially requires us to undertake that consideration bearing in mind the timeframes which stood specified in Sections 149, 153A and 153C as they stood prior to the commencement of Finance Act, 2021 9. . Thus, an action of reassessment which comes to be initiated in relation to a search undertaken on or after 01 April 2021 would have to meet the foundational tests as specified in the First Proviso to Section 149(1). A reassessment action would thus have to not only satisfy the time frames constructed in terms of Section 149, but in a relevant case and which is concerned with a search, also those which would be applicable by virtue of the provisions of Section 153A and 153C

3 2024 SCC OnLine Del 4230 . This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/07/2025 at 23:34:59 10. Undisputedly, and if the validity of the reassessment were to be tested on the anvil of Section 153C, the petitioner would be entitled to succeed for the following reasons. It is an undisputed fact that the proceedings under Section 148 commenced on the basis of the impugned notice dated 30 March 2023. This date would be of seminal importance since the period of six AYs' or the “relevant assessment year” would have to be reckoned from the date when action was initiated to reopen the assessment pertaining to AY 2013-2014. 11. The computation of the six or the block of ten AYs' was explained by us in Ojjus Medicare Private Limited in the following terms: “D. The First Proviso to Section 153C introduces a legal fiction on the basis of which the commencement date for computation of the six year or the ten year block is deemed to be the date of receipt of books of accounts by the jurisdictional AO. The identification of the starting block for the purposes of computation of the six and the ten year period is governed by the First Proviso to Section 153C, which significantly shifts the reference point spoken of in Section 153A(1), while defining the point from which the period of the “relevant assessment year” is to be calculated, to the date of receipt of the books of accounts, documents or assets seized by the jurisdictional AO of the non-searched person. The shift of the relevant date in the case of a non-searched person being regulated by the First Proviso of Section 153C(1) is an issue which is no longer res integra and stands authoritatively settled by virtue of the decisions of this Court in SSP Aviation and RRJ Securities as well as the decision of the Supreme Court in Jasjit Singh. The aforesaid legal position also stood reiterated by the Supreme Court in Vikram Sujitkumar Bhatia. The submission of the respondents, therefore, that the block periods would have to be reckoned with reference to the date of search can neither be countenanced nor accepted E. The reckoning of the six AYs' would require one to firstly identify the FY in which the search was undertaken and which would lead to the ascertainment of the AY relevant to the previous year of search. The block of six AYs' would consequently be those which immediately precede the AY relevant to the year of search. . In the case of a search assessment undertaken in terms of Section 153C, the solitary distinction would be that the previous year of search would stand substituted by the date or the year in which the books of accounts or documents and This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/07/2025 at 23:34:59 assets seized are handed over to the jurisdictional AO as opposed to the year of search which constitutes the basis for an assessment under Section 153A F. . While the identification and computation of the six AYs' hinges upon the phrase “immediately preceding the assessment year relevant to the previous year” of search, the ten year period would have to be reckoned from the 31st day of March of the AY relevant to the year of search. This, since undisputedly, Explanation 1 of Section 153A requires us to reckon it “from the end of the assessment year”. This distinction would have to necessarily be acknowledged in light of the statute having consciously adopted the phraseology “immediately preceding” when it be in relation to the six year period and employing the expression “from the end of the assessment year” while speaking of the ten year block

.”

7.

Accordingly, and for the reasons assigned in Dinesh Jindal, we find ourselves unable to sustain the reassessment action. This since, undisputedly, AY 2012-13 falls outside the maximum block of ten years.

8.

We, accordingly, allow the instant writ petitions and quash the impugned notices dated 31 March 2023 issued under Section 148 of the Act.

YASHWANT VARMA, J

HARISH VAIDYANATHAN SHANKAR, J FEBRUARY 3, 2025/kk

This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/07/2025 at 23:34:59

More judgments on Section 148

All 35,022 judgments and leading authorities on Section 148 →

Recent GST High Court judgments

Search GST case law →